Ashazi Services, a Bahrain-based electronic payments company, moved from place to place in the Gulf Kingdom. For a time it was based in managed office space in one of the gleaming towers of Manama’s prestigious diplomatic area, but also small apartments far from the centre.

In early 2011, however, Ashazi’s address was the office of its lawyer, Kumail Al Alawi, found above a side alley tucked between an outpost of Kentucky Fried Chicken and a car rental office.

So what sort of company was it? The question matters because in 2011 the Bahrain start-up was responsible for €4m per year of licence fee revenues reported by Wirecard, the German listed payments company. Ashazi Services Co WLL is one of the dormant companies leading back to E-Credit Plus Singapore, the first business purchased in Wirecard’s long Asian acquisition spree.Wirecard is a German-listed tech company worth €4.8bn, and a stock market rocket whose shares have risen eightfold in the last six years. It owns a bank and listed in Frankfurt through the 2005 reverse takeover of a defunct call centre operator. And, as outlined in our first post on the matter, the company presents a puzzle.

Since 2009 the company has struck a string of deals, often involving struggling companies, to buy customers for its payment services. Wirecard structured some of those deals in unusual ways, and has raised half a billion euros from investors to keep spending. The tactics prompt questions about what was bought, the nature of its growth and the value of €670m of intangible assets on the balance sheet.

Wirecard said:

In addition to a strong organic growth story in Europe, Wirecard started in 2009 a very successful expansion strategy into Asia. This expansion strategy is focusing on a “buy and build” strategy. By M&A Wirecard buys into local payment companies which are small in international terms but have local strengths, Wirecard contributes its international expertise and business is developed on a synergetic basis.

The Asian expansion began with Singapore-based E-Credit Plus PTE ltd. This post is a look at that deal, and some of the company’s customers.

Searching for Ashazi

We visited Mr Al Alawi at his new office by a highway, the neighbouring buildings under construction. A bookshelf was filled with thick ring binders named for different clients, but the slim black folder marked “Ashazi Services” the lawyer pulled down held only a handful of documents. Nasreen Sururi, Ashazi’s, owner and managing director, would be better placed to talk about the company, he suggested.

Ms Sururi started Ashazi in 2009 with minimal capital, according to the Bahrain Ministry of Industry and Commerce, which shows no record of annual financial statements filed since. In December 2011, discussing her nomination for an award at the Abu Dhabi Women In Leadership forum, she toldBahrain This Month her company had “operations in Bahrain, Kuwait and the United Kingdom, and endeavours to maintain a growing global network of partners worldwide”.

According to Companies House, Ashazi Services (UK) ltd was a dormant entity, since dissolved. It was owned by an Isle of Man company controlled by accountants based in the Channel Islands.

As for the global partners, in January 2012 Ashazi issued a press release announcing a strategic partnership agreement with hSenid Software International, a Sri Lankan company with offices around the world. “Under the terms of the agreement Ashazi will become the exclusive partner and agent for hSenid’s products in the Kingdom of Bahrain and will integrate its mobile payment products with hSenid’s mobile platform.” Another release in March elaborated on the collaboration.

However Dinesh Saparamadu, hSenid’s chief executive, had never heard of Ashazi before we asked, and said his company anyway did not have an exclusive partner and agent for Bahrain. “We haven’t done any work with this company and we don’t have any partnership with them.”

Ashazi’s website, now for sale, appears to have been short lived in fully functional state, according to the Internet Archive. An October 2010 snapshot of the website, the earliest available, appears to show a site under construction.

A valuable Wirecard customer

From August 2010 Wirecard began licensing software to Ashazi at a cost of €1m per quarter, according to accounts filed in Singapore by E-Credit Plus. A note to the accounts said the software was provided by Wirecard, passing through at no profit to the Singapore entity.

Did Ashazi pay those bills? At the end of the year E-Credit Plus reported licence fee receivables — sales recognised, but where cash is yet to be collected from customers — of S$3.5m (€2m).

The following year E-Credit Plus, renamed Wirecard Asia Pte ltd, reported licence fee income of S$7.2m ($4m), and licence fee receivables of S$6.1m (€3.6m). The high level of uncollected cash prompted the local audit firm to offer a qualified opinion on the accounts, issued June 15 2012.

For 2012 the auditor was changed to the local branch of Ernst & Young, and licence fee revenues were shifted to another subsidiary, E-Payment Singapore, also audited by E&Y. The 2012 accounts for E-Payment Singapore show revenues of $7.2m, licence fee income of S$6.4m, and trade receivables of $6.5m.

When we first reached Ms Sururi, we asked if she recalled the agreement with E-Credit.

“No, [pause] no”, she said. “I cannot recall anything. As you say, I cannot recall what I had for lunch. Literally I forget everything in my files.”

“I had a partner in the company and he used to agree all the contracts”, she said. “I was running the company more on the management and marketing side”. She asked to be sent details of the agreement by email.

Wirecard said:

Ashazi was a well-financed company backed by strong shareholder commitments that intended to build up a regional player in the middle-east. They struck a 3 years licensing agreement that was based on using Wirecard platform on a white label SaaS (Software as a Service) basis. Such a licensing agreement classically consists of a minimum transaction volume they pay for covering the minimum costs to run such a platform and a variable per transaction fee above that. The EUR 12mn were an aggregate projection based on their business plan. Of course in the financial statements only the annual amount was included that they had to pay. This was an aggregated amount of about two third (around EUR 8mn) of the initially forecasted amount. Ashazi fully honored their commitments and we have no open balance with this company.

Christopher Bauer, a German businessman with experience at payments companies, was also involved at Ashazi Services for 8 months in 2011. He said the company was “in the development stage, definitely” when he joined in January that year, with a small number of employees trying to win new clients. He said there was a licence bought for a payment gateway, “but it was before my time”. He said, “I was more on the PR and marketing side” and “most of the time it was her who did the work”.

Mr Bauer’s previous company, the Philippines based PayEasy Solutions International, had employed as chief operating officer James Bergman, former chief executive of the Aim-listed money transfer group Earthport. Mr Bergman said Ashazi “had more than two or three staff, it wasn’t just a one man band working out of a bedroom.” He said Ms Sururi was “a very intelligent lady. She was an impressive young female entrepreneur with a lot of drive.”

Ms Sururi said, via email:

I am a well-known and reputable businesswoman and entrepreneur in Bahrain, and I am looking back on a successful career of more than 10 years in the payments industry…

Ashazi was at all times managed and operated in full compliance with the laws and regulations of Bahrain. The UK branch was founded with the intention to obtain a payment institution license under the British Financial Conduct Authority (FCA) although eventually it did not become operational.

Ashazi has written proof of hSenid’s partnership with and I am surprised by your claim that a senior official of hSenid allegedly does not remember the cooperation between the two companies. In any event, I am not obliged to and will not provide you with confidential business information related to past commercial dealings with any of Ashazi’s business partners.

In relation to E-Credit, we would advise you to refer any questions related to E-Credit to representatives of E-Credit.

Ms Sururi’s Linked-In profile now describes her occupation as a TV presenter and actress since 2008. Bait Shazi Trading Co WLL, her new company registered in 2012, is an events business.

What might be considered unusual is that ownership of the company changed hands three times in the two months before the sale, according to Singapore filings. In November BS Payment Singapore Pte Ltd sold to Kennedy Jayaprakas J M Aime, a Malaysian individual listed as a director of E-Credit. Ownership then passed to Credence Collection Singapore Pte Ltd, on to the Malaysian Commerce Connecting Pte Ltd, then finally to Wirecard.

The company said, “before the transaction there were changes in ownership which were in good order with respect to the purchase of the company. The background of the transactions is a matter solely concerning the former owners.”

In 2010 the audit opinion for E-Credit was qualified due to problems verifying the validity of “gateway fees” from a subsidiary, Infotop Singapore.

Infotop was one of five resellers listed in note 14 to the E-Credit accounts detailing “Gateway Fees”:

E-Credit reported S$1.3m in gateway fees for 2010, compared to zero in 2009.

What might be considered odd is at the start of the year four of those so-called resellers for Wirecard were owned by Wirecard. A German filing lists them as subsidiaries.

The two UK entities, Manboo and E-Credence UK, were dormant, according to Companies House.

By the end of 2010 all four resellers were owned by the fifth, the Hong Kong registered Ugrand Universal.

In 2013 Deitmar Knoechelmann, a former director of Wirecard subsidiaries, became a 50 per cent owner of Ugrand, according to Hong Kong filings.

Wirecard said Ugrand is an external independent company and the four subsidiaries were not related parties. It said, “for HGB (German local GAAP) the legal ownership is relevant, while for IFRS the control is relevant, which was not taken over by Wirecard Group. The business background was that as part of the consolidation of the heterogeneous structure of E-credit we did not intend to take over these companies.”

Nature of the beast

Some might expect a software licensing deal to be highly profitable. After all, the purpose of buying customers is simply to push more transactions through Wirecard’s existing systems and infrastructure, and software is straightforward to replicate. However, founder and chief executive Markus Braun said Ashazi “was not a very profitable deal”. He said, “when the whole technology is on us, it produces a whole load of costs, proprietary development, local support.”

Perhaps such deals are a natural consequence of dealing with small payments companies. It is unusual to find individual customers listed in the accounts of companies bought by Wirecard, so Ashazi and Ugrand may be outliers, or they may be representative. The puzzle that is the nature of Wirecard’s long expansion remains.

Guest Speaker Mr. Hemant Amin, Founder, Chairman and CEO of Asiamin Capital, a single family office, and Founder and Chairman of the BRKets investor groupMarch 17th, 2015

Hemant, a big thank you for educating and inspiring the next generation of leaders. You are a rare positive role model in the Asian capital markets and you showed the students that it is possible to create value because one has the right values and mindset like Buffett and Munger! :)